Proactive Money

by Flemming Funch, 9 April 95.

I was just pondering how the concept of money can make sense at all in an
information economy, and I've got some ideas.

Before the arrival of agricultural societies money wasn't needed. Hunters
and gatherers would simply take what they needed or wanted, fight for it if
necessary, and continuously move on to where they could find the resources
they were seeking.

In "first wave" agricultural societies surpluses would be produced. The
land would be worked to produce food stuff and what is produced is either
stored up or it is traded. Trading would open the need for money as a means
of exchange. Also, it suddenly became important what you HAVE, what you
own. If you have land you can grow stuff and sell it. If you have produce
you can sell it. Power and affluence is measured by how much you currently
own.

The "second wave", the industrial revolution, centralized production and
brought about the need for a lot of machinery and buildings that needed to
be in place BEFORE something valuable was produced. That brought about the
need for financing, for somehow having or borrowing money before you could
create more. And then the monetary value of what you produced is in part
based on the need to recuperate the investments made, and the costs of the
resources that had to be acquired to put into the product. As opposed to
agricultural production, industrial production requires that you get stuff
from elsewhere that you can build your products of and with. Money comes to
symbolize what is OWED for the previously used resources that went into
what you are paying for. Wealth is based on how much you have produced in
the past that you are now being owed for.

The "third wave", the information society, changes the equation again, even
though the change isn't fully realized yet. Information and knowledge do
not have mass or weight. They can potentially be arrived at instantly and
they can in principle be replicated any number of times without any use of
resources. What becomes important is not what happened before, but what
happens AFTER a piece of information is generated or distributed. The value
of an idea is in what it allows you to do, not in the amount of trouble it
took to arrive at it, nor in its value as a possession of yours.

But our economic system is still based on second wave principles. Our
currencies are still defined by the amount of debt they represent. Our
financial institutions are based on the financing of production that then
is owed for and needs to be repaid with interest by the proceeds from
trading with the production.

Information products fit poorly into this scheme and it creates friction
and unnecessary hindrances to their use that they are treated by the old
industrial model. For example, the concept of intellectual property is an
attempt to treat information as material products.

If a factory produces a car, a certain amount of materials go into it and
it is in itself a very tangible product. It will always be worth something
in that there is a limited number of cars and raw materials and there is a
need for both. It is quite workable for the car factory to expect to get
back what they've spent on making the car, and then some, in exchange for
granting somebody the privilege to take possession of the car. That person
would after all be able to trade further with the car, as it has value in
itself.

A knowledge product, such as a software program, works quite differently.
It can be reproduced with no incremental cost and without any resources
required by its original manufacturer. Potential users will of course
quickly discover that they themselves can manufacture a fresh instance of a
software product.

A car manufacturer could probably care less if you went home and
constructed a copy of his car in your garage, because he knows that he gets
paid for the resources and work he puts into the production of his car. A
knowledge worker can not have the same assurance and might have impossible
difficulties ensuring that he will get his investments in time and
resources back, because he has nothing tangible to show for it. Somebody
might help him installing some kind of police state methods of monitoring
how people use his product so he can be paid, but that is really only
stalling the inevitable conclusion.

Information providers, such as copyright owners, software producers, or
artists running around angrily trying to stop people from using their
information without paying for their past work, is a sign of the economics
no longer being in tune with the methods of production and distribution.

The fact of the matter is that information inherently can be reproduced
infinitely and there is no inherent value in simply owning it, or in having
worked hard at it. There is only value in using it.

If instances of information in themselves had value, all one needed to do
to be rich would be to duplicate them a zillion times. It is nonsense of
course. Making repeated copies of a software program on your harddisk
doesn't produce any wealth.

We can not measure the worth of information by the resources that went into
producing it earlier. An idea that it took a second to generate might
revolutionize the world. A 50 million dollar movie might be an unwatchable
flop.

Producers have no inherent right to be compensated for what they did just
because they did it. A car maker doesn't expect to get anything more than
what people are willing to pay for each instance of his product, and if
that isn't more than what he spent making it he will go broke. An
information producer in an industrial society economy can't expect to be
treated any different. That is, he will be paid for each instance of his
product what people are willing to pay, and if he doesn't succeed in paying
his debts he will go broke.

The concept of having to be paid for what one did earlier is no longer
valid in the natural 3rd wave economy. It will probably go out kicking and
screaming before it is replaced with a new scheme.

"Pay me if you want my property" is 1st wave thinking. The most appropriate
currency for that is one that converts into tangible property in a
predictable manner, such as gold.

"How do I get back my investment?" is 2nd wave thinking. Dollars, defined
inherently as debts to the banks, are likewise 2nd wave currency, destined
for obsolesence.

"What can I do with my knowledge?" is 3rd wave thinking. It is no longer
about being paid for what you have or what you spent. It is how can you
spend the resources you have in the most productive way.

Existing information is free and infinitely reproducable so there is no
need to ration it and charge money for it or own it. The most valuable
services in an information society is to produce/invent something NEW or to
show people the way to what is already there. We're talking not only of
information, but of adding value TO information. Information itself will be
without inherent value in an advanced information society. Getting new
information that you need when you need it is what is valuable.

How do we account for new useful information and services being made
available? Do we need to account for stuff at all?

There is really no big need to account for existing information, as it
isn't limited. The same with creativity. It isn't limited and is impossible
to quantify. What we CAN quantify and account for is anything that is in a
limited supply.

As more and more resources get transformed into an unlimited supply they
will no longer need to be accounted for. For example, if we need some kind
of fuel to create electricity with, and there is a finite quantity of it,
we need to account for it, as well as for the electricity produced. But, if
for example we make solar panels ubiquitous, available for anybody, and
since sunlight is for our purposes inexhaustable, we don't have to account
for either.

For a 3rd wave economy we need a currency that doesn't reflect ownership or
past work, but that stimulates future creative work.

A more natural 3rd wave type of money would be something that doesn't
attain value before one spends it in a productive way. It would be present
or future oriented, rather than oriented towards the past. It is an
expression of what one finds use in or one's prediction of future benefits.

We could regard that kind of money as a voting system for what one finds of
value, rather than as an enforced exchange of scarcities.

Information and benefits are potentially unlimited. It therefore doesn't
make sense to match them up with a scarce, limited medium of assigning
value. The valued currency should be able to expand to match the value of
the benefits that are experienced, rather than the estimated values having
to be shrunk to the supply of currency available.

How exactly to do that, I don't know. And how to combine that with a medium
that can be used to acquire goods that actually ARE scarce and limited in
supply, I don't know.

But, it is apparently to me that the current money systems are not very
helpful in creating a better future where all of our needs are met, and it
is not very practical as a measure for what is actually valuable in our
lives.

We need new money that is proactive, that freely supports a desirable and
viable future, rather than money that is reactive, only representing past
acts and acquired possessions.

Currently only banks can use money pseudo-proactively, creating it by
lending it out. But that is done with some heavy strings attached, and the
inherently impossible condition that more money needs to be paid back than
what is given out. That equation doesn't add up in that only banks can
create money and they all need to be paid back more than the money that
they give out.

We probably need a system where anybody who creates or perceives value also
creates money, and the money is not a loan to be paid back, but a gift to
be passed on.

In such a system new projects would be financed, not by borrowing money,
but by gaining the trust of others who will believe in the project and
voluntarily give money to it, because they want to see it happen. Or by
producing value that people will feel like rewarding, thereby funding
further production of value in the same vein.

That is not possible with scarcity money, but only with money that people
can freely give without experiencing a personal loss from doing so. Money
that gains value from being used on something desirable, and that retains
no value from being kept.